IMF Chief Urges Nations to Rein in Debt10/14 06:24

   

   BANGKOK (AP) -- The head of the International Monetary Fund said Wednesday 
that the U.S. and other wealthy nations need to urgently tackle mounting global 
debt levels that are weighing most heavily on low-income countries and 
straining the global financial system.

   IMF Managing Director Kristalina Georgieva said that while U.S. Treasury 
Secretary Scott Bessent and other U.S. leaders recognize that the federal 
deficit and national debt have grown too high, just trying to grow the U.S. 
economy out of its more than $40 trillion in national debt would not suffice.

   Rising bond yields, reflecting the higher premiums associated with greater 
risks, have meanwhile been disrupting financial markets.

   "At the fund, we believe that, growth, of course, helps, but it cannot 
deliver fast enough the necessary adjustments," Georgieva said at the autumn 
meeting of the IMF and World Bank in Bangkok.

   "There is no magic," she said, noting some other measures would be needed. 
"You have to go in a direction of tightening ... bringing the deficit down."

   'Fiscal consolidation' faces challenges 

   Rising debt levels and global inflation, partly resulting from high energy 
costs due to the Iran war, have pushed interest rates to multidecade highs, 
adding to the burdens of the world's poorest nations.

   Efforts to bring debt under control with what Georgieva and other experts 
call "fiscal consolidation" have suffered setbacks from heavy spending during 
the COVID-19 pandemic and since.

   "Fiscal risks are rising, and a proper reaction is largely absent in many 
countries," said Rodrigo Valdes, director of the IMF's Fiscal Affairs 
Department. "And in major advanced economies, the effect of fiscal indiscipline 
does not stop at the border. It travels to the rest of the world."

   "Among the world's poorest countries, interest payments have reached 
historic highs relative to revenue, and declining amounts of aid are creating 
gaps that some countries have been unable to finance," the IMF's latest Fiscal 
Monitor said.

   That is forcing countries to make hard choices between supporting their most 
vulnerable people and meeting their debt repayment obligations.

   "The Global South is paying the price for rising interest rates in wealthier 
countries," U.K. Foreign Secretary Ed Miliband said at an event on the 
sidelines of the IMF meetings.

   "We need a new deal on debt, a deal that supports countries to repay over 
longer time horizons and, crucially, refinancing with better rates to give 
developing countries precious fiscal space," he said.

   Nations need help with job creation and investment 

   The median developing country is paying three times more on their interest 
repayments than developed countries, noted Alexander De Croo, former Belgian 
prime minister and the administrator of the United Nations Development 
Programme.

   On average nearly 10% of government spending is going to repay debt, and the 
combination of high prices for fuel, fertilizer and other needs, the impact of 
the El Nino weather phenomenon and higher borrowing costs has left many low 
income countries with little opportunity to recover.

   "I mean, we don't see really a light at the end of the tunnel," De Croo 
said, said in an interview with The Associated Press.

   Generating jobs, especially at a time when increasing use of artificial 
intelligence threatens to make many traditional occupations obsolete, is 
another top priority. More than 1.2 billion young people are expected to enter 
the global workforce in the next decade or so, while forecasts suggest a net 
creation of only 400 million new jobs.

   The UNDP announced this week a "Jobs for Prosperity" initiative that will 
work with governments, development banks such as the World Bank and private 
businesses to encourage investment in key job creating areas such as tourism, 
healthcare and food processing.

   The initiative and other efforts will focus on helping countries attract 
investment by improving their governance and policies, while creating pipelines 
of "investible projects," De Croo said.

   "These are things that are feasible. It's been proven that you can do it in 
many places of the world."

   In other developments, a day after cyberattacks caused refrigeration systems 
to overheat at hundreds of stores in France, the IMF, Bank of Thailand and 
World Bank Group announced Wednesday a "Bangkok Blueprint" to combat 
cybercrime, financial fraud and online scams.